The Cryptocurrencies recover after Monday’s stock market crash. After falling below $50,000, Bitcoin is gaining traction during the Asian session and is already trading above $55,000 on Tuesday. Ethereum, meanwhile, is up more than 8% and is trading at $2,400.
Most major altcoins are also up strongly. The biggest gainers are Solana (20%), followed by Shiba Inu (19.4%), followed by Chainlink (17.3%), Dogecoin (13.2%), Avalanche (12.5%) and Binance Coin (11.1%).
Following the significant falls seen yesterday in the equity markets, the stock markets They seem to have regained their calm. The European stock market is rising quietly, while Asian indices have recovered strongly and Wall Street futures point to a positive session for the US stock market.
One of the main sources of short-term instability appear to be stabilizing, given that The yen depreciates against the dollar and gives some relief to traders who had to unwind their carry trade positions in a hurry, due to the strong appreciation of the Japanese currency in recent days.
“In general, the Recent drop in the price of bitcoin is not significantly worse than the drop in the Nikkei index, indicating that current sentiment is driven by external factors rather than problems within the cryptocurrency market itself. It is unclear whether we are entering a bear market, and Much will depend on the performance of equity markets this month”said Ruslan Lienkha, Head of Markets at YouHodler.
What will happen with the Fed and how will it affect cryptocurrencies?
While some analysts like Lienkha believe that this drop may be the beginning of a bear market for digital assets, others are more cautious. Many point out that August has traditionally been a negative month for cryptocurrencieswhile recalling that expectations that the Federal Reserve (Fed) will cut interest rates in September or possible upward movements related to the US elections are some of the factors that could support cryptocurrencies.
Related to the latter, one of the factors that has done the most damage to the market has been the belief that The Fed has been slow in its rate cut processas it could have weakened the US economy more than necessary. Current market expectations are for the US central bank to carry out a 50 basis point cut in September, but some strategists believe that this situation and The magnitude of this cut may be somewhat exaggerated.
“The market is expecting a 50 basis point rate cut by the Federal Reserve at its September meeting, which I think will be too much. The US economy is showing signs of slowing, but it is not as severe as the market is putting in prices”notes Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
Did Bitcoin fail as a hedge asset?
Likewise, other analysts, such as Alex Thorn of Galaxy Digital, point out that Similar declines have been seen in other bull markets. “We would expect cryptocurrencies to recover relatively quickly, given that most of the selling right now is forced and outright panic selling. Ironically, it has opened the floodgates to a much larger bull market,” said Daniel Cheung, co-founder of digital asset firm Syncracy Capital, while recalling that cryptocurrencies also crashed just before rallying so strongly in 2020.
“It felt like we would never recover. The media claimed that bitcoin had failed in its test as a hedging asset. Emotions aside, history suggests this weekend’s sell-off is a buying opportunity,” added Matt Hougan, CEO of Bitwise.
Source: Ambito
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